For Release: December 18,
2002 FTC Announces Final Amendments to
Telemarketing Sales Rule, Including National "Do Not Call" Registry
Registry Will Provide Consumers
With More Control Over Telemarketing Calls They Receive; Other Changes
Concern Billing Authorization, Charitable Solicitations, and Use of
Caller-ID
The Federal Trade Commission today
announced a series of amendments to the Telemarketing Sales Rule (TSR)
including the development of a national "do not call" registry that
empowers consumers to stop most unwanted telemarketing calls. The other
amendments include new provisions that will:
- crack down on unauthorized billing by
telemarketers;
- impose tight new restrictions on the
practice of "call abandonment" - where a consumer rushes to answer the
phone, only to find "dead air;" and
- require telemarketers to transmit
Caller-ID information, so that consumers who subscribe to Caller-ID
services will know who is calling.
The majority of the changes will become
effective immediately. Creation of the "do not call" registry, however,
requires additional time. Information about the TSR amendments and the "do
not call" registry is available at
www.ftc.gov/donotcall. It is planned that the system will be ready
to begin accepting consumer registrations about four months after funding
approval by Congress. Registration via the Internet will be available
nationwide at that time, but registration via toll-free number will be
phased in by region. Approximately two months after the completion of the
phased-in registration, telemarketers will be able to access the registry
to "scrub" their call lists so that they can avoid calling consumers on
the registry. A month after that, the Commission will begin enforcing the
"do not call" registry provisions. Registration will be good for five
years, or until the consumer changes his or her phone number or moves.
"These amendments redefine the nature of
telemarketing for both consumers and businesses," said FTC Chairman
Timothy J. Muris. "They protect consumers' privacy, give them a choice
about whether to receive most telemarketing calls, and provide enhanced
protections against fraudulent telemarketers. Soon, signing up for the
national "do not call" registry will be just a mouse click or toll-free
call away."
The National "Do Not Call"
Registry
Under the amended Rule, the FTC will
establish a centralized national "do not call" registry to enable
consumers to stop most unwanted telemarketing calls by making just one
request per phone number to the Commission, either via the Internet on a
dedicated Web site or by calling a toll-free number. The Commission's
decision to develop such a registry comes after nearly a year of analysis,
in which more than 60,000 public comments were received, the overwhelming
majority of which supported a national "do not call" list.
It is important to note that it will
take the Commission time to develop the national "do not call" registry
system and put it into place. Consumers will not be able to sign up
immediately. It is expected that once funding approval is received from
Congress, it will take about four months to develop the system and another
two months for phased-in registration before consumers will receive fewer
unwanted telemarketing calls. The Commission will announce the toll-free
number and the order in which regions can enroll, as well as instructions
for Internet registration, at a later date. A separate sign-up will be
required for each telephone number a consumer wishes to register.
There will be no charge to consumers to
register their phone number with the FTC's national "do not call"
registry. Telemarketers will, however, be required to pay for access to
the names on the list, and will have to "scrub" their calling lists every
three months to remove any consumers' telephone numbers that are included
in the new registry.
The amended Rule contains a narrowly
tailored exemption under which telemarketers may continue to call
consumers with whom they have an "established business relationship," if
the consumer has purchased, leased, or rented goods or services from the
company within 18 months preceding the call, or if the consumer has
submitted an application or made an inquiry to the company within the
three months preceding the call. Even if there is an "established business
relationship," consumers can make a specific request to the company not to
call. Also, if there is a particular company from whom a consumer wants to
receive telemarketing calls, the consumer can give that company written
permission to call, even if the consumer is on the national registry.
In addition, the amended Rule retains the
existing company-specific "do not call" provisions that require a
telemarketer to maintain its own "do not call" list and to honor
consumers' requests to be placed on that list and receive no further
calls. Finally, the amended Rule exempts telemarketers calling to solicit
charitable contributions from compliance with the provisions of the
national registry, but requires that they accept entity-specific "do not
call" requests.
Billing Authorization
Provisions
The Rule review and Rule amendment
proceeding focused considerable attention on telemarketers and sellers
billing charges to consumers' credit card and other accounts without the
account holder's authorization or knowledge. In some instances, these
unauthorized charges result from the fact that telemarketers and sellers
often obtain consumers' account numbers or other billing information from
sources other than the account holders themselves before they even place a
sales call to the account holders. The amended Rule contains a number of
provisions to address this problem.
First, telemarketers will be prohibited
from receiving unencrypted consumer account numbers, except when the
disclosure or receipt of these unencrypted numbers is for the purpose of
processing a payment for goods or services (or a charitable contribution)
according to the terms of a transaction approved by the consumer.
Second, in every telemarketing transaction,
the amended Rule bans unauthorized billing, prohibiting telemarketers from
processing any billing information for payment without the express
informed consent of the customer or donor. It also specifies exactly how
express informed consent must be obtained whenever a telemarketer: 1) has
the ability to charge the consumer's account without the consumer
divulging his or her account number, and 2) the offer the telemarketer is
promoting involves a so-called "free-to-pay conversion" feature - where
there is a free trial period after which the consumer automatically incurs
charges, unless he or she takes affirmative action to cancel. In such a
scenario, the telemarketer must: obtain the consumer's express agreement
to be charged, and to be charged using a particular account number; elicit
from the consumer at least the last four digits of the account number to
be charged; and make and maintain an audio recording of the entire
telemarketing transaction.
The amended Rule broadly requires
disclosure of all material terms of any offer that involves a free trial
period after which the consumer automatically incurs charges, unless he or
she takes affirmative action to cancel. The Rule also prohibits specific
misrepresentations in connection with such offers.
The amended TSR also tightens the existing
provisions governing transactions where a novel or unfamiliar payment
method is used - such as "demand drafts" (or "phone checks" - where a
consumer's checking account is debited based only on the consumer's
disclosure of the account number, not on writing a check), or charges to
an existing mortgage account, or a utility account. The amended Rule
specifies the information that telemarketers must disclose to ensure that
consumers have given their "express verifiable authorization" to incur
charges using such novel payment methods. These provisions apply for any
payment method other than credit cards subject to the Fair Credit Billing
Act or debit cards subject to the Electronic Funds Transfer Act.
Charitable Solicitations
The amended Rule modifies the definition of
telemarketing to include interstate calls made to solicit charitable
contributions. It also requires telemarketers calling to solicit such
contributions to promptly disclose the name of the organization making the
request and that the purpose of the call is to ask for a charitable
contribution - as required by the USA PATRIOT Act. These new provisions,
like analogous provisions applicable to commercial sales calls in the
original Rule, will ensure that consumers quickly receive key information
necessary to enable them to decide whether to prolong the initial
intrusion into their privacy, or to terminate the call. They will also
help to protect consumers from deceptive and fraudulent charitable
fundraising. Also as required by the USA PATRIOT Act, the amended TSR
expressly prohibits certain misrepresentations in charitable fundraising
calls. Finally, the amended Rule exempts charitable fundraising calls from
compliance with the Rule's new national "do not call" registry, but does
require that such telemarketers accept and adhere to entity-specific "do
not call" requests from consumers.
Call Abandonment and Caller ID
During the public comment period, many
consumers expressed concern about the number of "dead-air" calls that they
were receiving at home. Such calls typically occur when telemarketers use
"predictive dialers" or other automatic dialing software to call many
consumers at once. The automatic equipment is very efficient for
telemarketers, but it inevitably makes more calls that connect to
consumers than there are available sales representatives to handle the
calls. The "dead air" actually results from calls that are abandoned
because there are not enough sales representatives available to talk to
every consumer who answers the phone.
Call abandonment violates the amended Rule.
The amended Rule, however, gives businesses a "safe harbor" on call
abandonment if they meet certain requirements. Specifically, businesses
will not be liable for violating this provision of the Rule if they: 1)
ensure that no more than three percent of calls that are answered by a
person are abandoned, measured per day per calling campaign; 2) allow each
called consumer's telephone to ring for at least 15 seconds or four rings
before disconnecting; 3) connect each call to a sales representative
within two seconds of the consumer's greeting, or, if a sales
representative is not available to speak with the consumer within two
seconds of the call being answered, they play a recorded message stating
the name and telephone number of the seller - the message cannot include a
sales pitch; and 4) maintain records showing compliance with the
requirements for abandonment rate, ring time and recorded message.
Regarding the use of Caller-ID devices, the
amended Rule requires telemarketers to transmit their telephone number to
a consumer's Caller-ID service. Further, if the telemarketer's carrier
makes it possible to transmit the calling company's name, the telemarketer
will have to transmit this information as well. This will help consumers
to know exactly who is calling and to protect their own privacy. It will
also increase telemarketers' accountability, and aid law enforcement in
identifying companies violating the "do not call" and other provisions of
the amended Rule. When sending this information, the telemarketer will be
allowed to substitute the name and customer or donor service number of the
seller or charitable organization on behalf of which the call is being
placed. Telemarketers will have 12 months to come into compliance with
each of the new requirements related to Caller-ID.
The Commission vote to approve publication
of a notice of final rulemaking in the Federal Register announcing the
amendments to the TSR was 5-0, with Commissioner Orson Swindle issuing a
separate concurring statement.
In his concurring statement, Commissioner
Orson Swindle stated, "I wholeheartedly support the amendments to the
Telemarketing Sales Rule . . . because I believe that they will help
protect consumers from deceptive and abusive telemarketing practices. In
particular, these amendments will give consumers the ability to avoid the
sheer volume of unwanted telemarketing calls that many consider to be a
nuisance."
Commissioner Swindle explained that he
believed the national "do-not-call" registry would go a long way to help
consumers prevent unwanted intrusions into their homes. He noted, however,
that a number of entities were not subject to the TSR's requirements. The
Commission lacks jurisdiction, in whole or in part, over the calls of
entities such as banks, telephone companies, airlines, insurance
companies, credit unions, charities, political campaigns, and political
fund raisers. "From the perspective of consumers," Commissioner Swindle
stated, "the right to be let alone is invaded just as much by unwanted
calls from exempt entities (e.g., banks, telephone companies, or political
fund-raisers) as it is by such calls from covered entities. . . .
Therefore, I believe that the entire spectrum of entities that make
telemarketing calls to consumers should be subject to do-not-call
requirements."
Commissioner Swindle also stated that he
agreed for the most part with the Commission's method of determining what
constitutes an abusive practice under the Telemarketing Act and the TSR.
When the Commission seeks to identify practices as abusive that are less
distinctly within the parameters of the examples included in the
Telemarketing Act, the Commission employs its unfairness analysis.
Commissioner Swindle stated that he would have preferred it had the
Commission looked to the plain meaning of the term "abusive," and then
formulated a separate standard to identify abusive telemarketing
practices. Commissioner Swindle nevertheless agreed with the Commission's
conclusion that a telemarketing practice that meets the strict unfairness
standard will constitute an abusive practice for purposes of the
Telemarketing Act and the TSR. In light of the rulemaking record, he
supported the TSR amendments that are analyzed under this standard.
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